Sebastian Renner / Jann Lay / Michael Schleicher

The Effects of Energy Price Changes: Heterogeneous Welfare Impacts, Energy Poverty, and CO2 Emissions in Indonesia

GIGA Working Paper, No. 302, May 2017

Abstract
We study the welfare, energy poverty, and CO2 emission implications of energy price change scenarios in Indonesia. Our analysis extends previous analyses of energy price impacts at the household level in several ways. First, by employing a household energy demand system (QUAIDS), we are able to distinguish between first‐ and second‐order welfare effects over the income distribution. Our analysis shows considerable heterogeneity of welfare impacts. For gasoline and electricity, first‐order calculations overestimate welfare effects by 10 to 20 per cent for price changes between 20 and 50 per cent. Second, our results point to the ownership of energy‐processing durables as another source of impact heterogeneity. Poor households that own these goods may be hit particularly strongly by energy price increases. Third, we extend the welfare analysis beyond the money‐metric utility effects and look at energy poverty, which is understood as the absence of or imperfect access to reliable and clean modern energy services. Drawing on the estimated demand function, we find that price increases have substantial effects on energy poverty. Fourth, our analysis explicitly considers the emissions effects of energy price scenarios. We find that reduced household energy demand implies a substantial reduction in emissions. The analysis thus indicates that energy prices may serve as an effective mitigation instrument but also have important adverse welfare effects. The latter can, however, be mitigated by appropriate compensation policies.

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GIGA AutorInnen

Sebastian Renner ist wissenschaftlicher Mitarbeiter an der Universität Göttingen und Research Fellow am GIGA German Institute of Global and Area Studies. Seine Forschungsinteressen liegen im Querschnittsbereich von Umwelt- und Entwicklungsfragen wie der Messung von Armut, der Verteilungswirkungen von Klimapolitik und der ökologisch-ökonomischen Zielkonflikte von wirtschaftlicher Entwicklung.

Apl. Prof. Dr. Jann Lay

Komm. Direktor des GIGA Institut für Afrika-Studien
Leitung FSP 3

Apl. Prof. Dr. Jann Lay ist außerplanmäßiger Professor an der Georg-August-Universität Göttingen, Leiter des GIGA Forschungsschwerpunkts 3: Wachstum und Entwicklung und kommissarischer Direktor des GIGA Instituts für Afrika-Studien.

Aktuelle Publikationen der AutorInnen

Daniel Neff / Cornelis W. Haasnoot / Kunal Sen / Sebastian Renner

The Social and Economic Situation of the Scheduled Tribes in India

in: Matthew Manning / Christopher Ambrey / Christopher Fleming (eds.), Routledge Handbook of Indigenous Well-being, London: Routledge, forthcoming

Jann Lay / Kerstin Nolte / Kacana Sipangule

Large-Scale Farms and Smallholders: Evidence from Zambia

GIGA Working Paper, No. 310, February 2018

Sebastian Renner

Poverty and distributional effects of a carbon tax in Mexico

Energy Policy, 112, 2018, 98-110

Marina Dodlova / Anna Giolbas / Jann Lay

Non-contributory social transfer programs in developing countries: A new dataset and research agenda

Data in Brief, 16, 2018, 51-64

Jann Lay / Kerstin Nolte

Determinants of foreign land acquisitions in low- and middle-income countries

Journal of Economic Geography, 18, 2018, 1, 59-86